OpenAI slammed with IRS complaint over Sam Altman’s conflict of interest

The ongoing feud between Elon Musk and Sam Altman has intensified once more with legal battles linked to OpenAI’s desire to shift from a nonprofit to a for-profit entity. 

Musk believes the attempt to shift from a nonprofit model to a for-profit one is a betrayal of its original mandate, but OpenAI defended the shift, claiming it needs it to keep up with the costly endeavor of building AI infrastructure.

After the matter became public, OpenAI decided to delay its plans. So, instead of outrightly becoming for-profit, the company announced it would only partially convert to a for-profit entity.

While many called it a partial victory for Musk, his lawyer, Marc Toberoff, had a different opinion, dismissing the move as a “sleight of hand” because it fails to address core issues.

Musk has not shown that he intends to give up and accept that outcome either.

OpenAI slammed with IRS complaint over Sam Altman’s conflict of interest

Now, a tech watchdog, known as the Midas Project, has joined Musk in the fight to keep the OpenAI nonprofit by filing a formal complaint with the Internal Revenue Service (IRS) against the company.

The project alleged that Altman and board members are well-positioned to enjoy personal financial gains, which violates the U.S. tax laws governing nonprofits.

The complaint was filed on Thursday and highlights conflicts of interest that prioritize the enrichment of Altman and some key members over the organization’s charitable mission.

The Midas Project has pointed to Altman’s dual role as the CEO of OpenAI’s for-profit arm and a nonprofit board member as a problem, as it gives him influence over decisions that could personally benefit him, even at the nonprofit’s expense.

The complaint has warned that if OpenAI is allowed to restructure, it could grant Altman an equity stake worth billions, which may weaken the nonprofit board’s control, and undermine its mission to develop AI for public benefit.

The group also accused OpenAI of improperly using nonprofit grants, like the $50 million NextGenAI Program, to subsidize for-profit customers by demanding that grant recipients use the firm’s tools.

Tyler Johnston, executive director of the Midas Project, has called for transparency, stating that OpenAI’s rapid development of controversial AI technology demands adherence to legal and public interest standards.

Drama continues to follow OpenAI and its restructuring plans

OpenAI has not given up on its efforts to become a for-profit entity despite Musk’s efforts and has now gone on the offensive by filing a complaint with the California Fair Political Practices Commission against nonprofit Californians for Accountability in a New Internet (CANI), alleging that it violated lobbying laws.

CANI is suspected of having links to Musk via a Tesla-related property, and has in the past spoken out against OpenAI’s for-profit plans. However, the main reason Altman’s firm is suing is because it alleges CANI played a big role in opposing a California bill (SB 1047) that could have hindered its for-profit plans.

OpenAI has reportedly investigated CANI and is now convinced it may be fronting a fake leader, Jeffrey Mark Gardner, and failing to report lobbying payments.

Its investigation into CANI involved extensive efforts to identify Gardner, which revealed a potential link to an entity named Tesla Place, LLC. However, no clear connection to Musk’s Tesla has been confirmed, and CANI spokesperson Becky Warren has also previously denied that the group has any connection to Musk, describing the nonprofit as a grassroots effort.

The complaint against CANI, dated Monday, follows OpenAI’s attempt to subpoena the group in May over links it may have to Musk and shows just how far the AI firm is willing to go in its belief that those who oppose its restructuring are secretly linked to its rivals.

It is now up to California’s attorney general to investigate, but as the investigation goes on, OpenAI’s dominance in the AI market will face existential questions, and Altman’s suspected conflict of interest is not helping matters.

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